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Dubai Eyes $10b Bond Offer by November

DUBAI — The Dubai government is targeting to issue the second tranche of a $20-billion bond programme either in October or November, Emaar Properties PJSC Chairman Mohammed Alabbar said.

In an interview with CNN on Friday, Alabbar said: “I am not sure about the date, October/November is a more reasonable date.”

“I think it will be majority government, and some private sector in my opinion,” said the head of the Middle East’s biggest property company, who is also chief of Dubai’s Advisory Council.

The $10-billion bond offer would be the second tranche of a planned $20 billion bond programme by the Dubai government, aimed at helping distressed government-owned and government-affiated companies that have been hit hard by the global financial crisis. The first tranche of $10 billion was issued in February and was snapped up entirely by the UAE’s Central Bank.

Alabbar said the Dubai’s outstanding debts this year is $9 billion, which he implied, is not worrisome.

“If you look at the government of Dubai, the $9 billion debt that is only for utilities, and there is good return in utilities locally. The rest is not a government debt. It is not a debt for any government purposes. These are with companies owned by the government.”

In an interview last September 8, His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said the emirate would be able to repay at least $4.52 billion of debt coming due later this year. The Dubai government must repay a $1 billion Islamic bond maturing in November, while state-owned property developer Nakheel PJSC has a $3.52 billion Islamic bond due in December.

Dubai borrowed in the last few years, $80 billion to finance its transformation into an international logistics, tourism and finance hub, and the seizure of global credit markets sparked concern about its ability to repay the loans. Nearly $60 billion of these debts will need to be paid back in three years.

Government hopes the stimulus measures should start trickling in, and Alabbar expressed confidence about UAE’s economic recovery prospects.

“I think we’ll see between 4-5 per cent growth in 2010,” said Alabbar, dismissing dire economic forecasts of the IMF-World Bank.

He said that unlike other economies where government debts, unemployment numbers and consumer loan levels are very high, economies in the Gulf region, including the UAE, still have “reasonable” employment, while banks are in relatively good condition, “even if some of them have to increase their provisioning.”

The financial crisis though has prompted a major restructuring at some of Dubai’s government-run companies that are struggling to cope with mounting debts and weaker markets.

In September, the government-owned conglomerate Dubai World folded its hotel and real estate assets from its Nakheel property unit into its Istithmar World investment arm, as part of the group’s restructuring. Several senior Nakheel executives have been transferred to Istithmar World as well.

Dubai World has at least $59 billion of liabilities, a large proportion of the emirate’s total debt. Nakheel, famed for its Plam Jumeriah and The World developments, has been hit hard by the global financial crisis.

Istithmar World, which owns an African airline and the troubled US men’s retailer Barneys, is the subject of speculation that it faces problems of its own. It hired an advisory firm last August to help it assess options to reinforce Barneys’ financial position and replaced Istithmar World’s two co-chief investment officers.

“I think restructuring of all businesses is a must. We cannot do business the way we used to do. I have restructured my business, and I am sure DP World is restructuring the way Mercedes Benz is restructuring,” said Emaar’s Alabbar.

Alabbar said the crisis has brought new and unprecedented challenges for companies like Emaar.

“I thought I was conservative in business, thank God I was conservative, I think I should have been more conservative. I am a hands-on type of operator. I have learned that the art of managing business has changed forever. I think you should be demanding. I think productivity of people must be double of what it used to be. I think financial control needs to be strengthened and you should be demanding.”

In a separate interview with CNBC America aired on Thursday night in Dubai, Alabbar said that despite Dubai’s setbacks, it continues to attract expatriates seeking to work in the emirate.

“We still have 300,000 people moving into the city on an annual basis compared to 90,000 people moving to Florida during good old times. So the show must move on. You know this city is being built to serve 1.5 billion people around us. That is a fact of life.”

One upside to the crisis is that workers who kept their jobs in Dubai appear to be wanting to stay for a longer period, noted Alabbar. Prior to the crisis, the employee turnover was quite high as companies pirated employees, often offering substantial salary hikes.

“There are people who are losing jobs from Louisiana to Bombay. Of course there are people who have lost their jobs in Dubai as well. Today with reasonable unemployment figures, I think people are working harder for their jobs. We are getting much better productivity out of our people. I think it is giving us a balance. Last year, it was really abnormal. We could not get anything done.”

· rocel@khaleejtimes.com